Rule 202: Compliance With Professional Standards

Rule 202 of the American Institute of Certified Public Accountants’ (AICPA) Code of Professional Conduct mandates that all members performing professional services must adhere to the standards set by specific, designated bodies. This rule ensures that whether a CPA is conducting an audit, preparing a tax return, or offering consulting advice, the work meets an authoritative benchmark for quality. It transforms technical standards into ethical obligations, linking a member’s professional duties to their responsibility to uphold public trust. By requiring adherence to established standards, Rule 202 provides a clear framework for acceptable professional practice, allowing clients and the public to rely on the consistency of the work performed.

The Core Mandate of Rule 202

Rule 202 states that a member performing professional services such as auditing, review, consulting, or tax services must comply with standards from bodies designated by the AICPA Council. This requirement is broad, applying to any AICPA “member” in public practice, industry, government, or education. The term “professional services” is equally expansive, covering a CPA’s work from traditional audits to personal financial planning.

The rule incorporates these technical standards directly into the Code of Professional Conduct. A failure to follow a specific standard during an engagement is not just a technical error but also an ethical violation under Rule 202. This ensures professional judgment is exercised within a recognized framework and that all services are performed with a consistent level of quality.

Recognized Standard-Setting Bodies

Rule 202’s authority comes from standards created by several designated bodies that establish technical requirements. A primary standard-setter is the Financial Accounting Standards Board (FASB), which establishes generally accepted accounting principles (GAAP) for non-governmental entities. The Governmental Accounting Standards Board (GASB) is its counterpart for state and local government entities.

The Public Company Accounting Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act of 2002. The PCAOB sets auditing and professional practice standards for audits of public companies, or “issuers.” Its standards are mandatory for any firm auditing a publicly traded company, and compliance is a matter of federal law and professional ethics.

The AICPA also has technical committees designated to set standards. The Auditing Standards Board (ASB) issues Statements on Auditing Standards (SAS), which apply to audits of non-public entities. For engagements with unaudited financial statements, the Accounting and Review Services Committee (ARSC) issues Statements on Standards for Accounting and Review Services (SSARS).

Applying Standards to Professional Services

For a member performing an audit of a private company, compliance means adhering to the Statements on Auditing Standards (SAS) issued by the ASB. These standards govern everything from the initial planning and risk assessment of the audit to the evidence gathered and the final auditor’s report. An auditor must be prepared to justify compliance with each relevant SAS.

When preparing or reviewing financial statements without a full audit, a member must follow the Statements on Standards for Accounting and Review Services (SSARS). These standards provide the framework for compilation engagements, where an accountant assists management in presenting financial information. They also apply to review engagements, which provide limited assurance that financial statements are free of material misstatement.

Attestation engagements require compliance with the Statements on Standards for Attestation Engagements (SSAE). These standards are used for services like reporting on an entity’s compliance with laws or assessing a company’s internal controls. The SSAE provide a framework for engagements where a practitioner issues a report on a subject matter that is another party’s responsibility.

Advisory work is governed by the Statements on Standards for Consulting Services (SSCS), which apply to a broad range of consulting activities. The SSCS require the member to serve the client with integrity and objectivity. Members must also establish a clear understanding with the client on the engagement’s scope and limitations and communicate effectively.

Members providing tax advice, return preparation, or representation must adhere to the Statements on Standards for Tax Services (SSTS). These standards address issues such as the use of estimates and the reliance on information from others. They also cover the professional responsibility to inform a client of errors in a previously filed return.